TXU’s buyout structure creates a potential model for utility M&A and refinancing deals
2007 was a big year for TXU Corp., as it went private in the largest leveraged buyout in history. To sweeten the deal for environmentalists and regulators, TXU made structural and financial concessions. Now TXU’s ring-fencing structure might become a template for future utility M&A and refinancing deals.
NERC’s new cyber security rules may minimize cost of compliance, but they leave utilities guessing on how to identify risks.
Liam Baker, vice president for regulatory affairs at US Power Generating, questions whether his company’s power plants and control systems in New York and Massachusetts must comply with the electric industry’s new mandatory standards for cyber security. Baker voiced his doubts in written comments he filed in October with FERC.
Financial-risk coverage is falling short in utility returns
When setting the allowed returns on common equity of jurisdictional utilities, state regulatory authorities apply the virtually universal standard that the allowed returns should be similar to returns on common equity investments in companies of equivalent risk. Such returns generally are accepted as fair if they are no higher than necessary and still sufficient to attract investment. Despite the universality of this regulatory standard, our investigation of recent allowed returns by state commissions shows that a key risk—financial risk—as measured by accepted, measurable metrics, has not been a factor affecting the level of allowed returns in the United States in recent years.
Duke Energy named Lynn J. Good group executive and president – commercial businesses. AGL Resources announced John W. Somerhalder II, the company’s president and CEO, has been named chairman of the board. Energy West announced several changes in its management team. And others...
Credit-quality concerns join fuel and market factors to affect power-plant valuation
Lenders know there are billions of dollars of weak financial assets in the market, such as securities backed by bad mortgages. The problem is no one knows who is exposed at what level to those weak financial assets. This causes a lack of confidence in the lending industry, and a credit crunch that — if unabated — could cause a recession.
Entergy’s $20 billion spin-off plan elicits yawns on Wall Street
(January 2008)Entergy Corp.’s announced plan to spin off about 5,000 MW of nuclear assets generated a major buzz when it was announced in early November.
Special Report on Cyber Security and CIP Compliance
Utilities are gearing up for compliance with the new CIP standards. NERC, however, has taken a flexible approach to implementation that leaves some companies confused. Can utilities comply by 2009, and will their measures be effective in securing the grid?
Utilities are gearing up for cyber security compliance. Will the standards prove worthy?
The NERC CIP standards represent an historic achievement. They include the first mandatory cyber security requirements of their kind to be imposed on a U.S. private-sector industry. Considering the scope and sensitivity of the grid-security issue, developing a set of enforceable standards inevitably would entail a complex and contentious process. From that perspective, NERC, FERC and the industry have made remarkable progress, and their efforts deserve accolades.
ERCOT utilities approach CIP compliance from varying perspectives
As proposed by the North American Electric Reliability Corp., the new critical infrastructure protection (CIP) standards charge utilities with identifying their own critical assets and related cyber systems. This approach allows great flexibility for utilities to apply the CIP standards to their particular situations. This will help ensure that their efforts focus on securing critical assets, rather than on complying with an overly prescriptive set of mandates that might or might not yield a secure grid.
Test gets major media hype, but SCADA vulnerabilities remain
A simulated attack, named the Aurora Generator Test, took place in March 2007 by researchers investigating supervisory control and data acquisition (SCADA) system vulnerabilities at utility companies. The experiment involved hackers invading the plant’s control system to change the operating cycle of the generator.